A REGULATORY balance is needed to ensure Australia avoids importing illegally-harvested timber without burdening business with more red tape, the Commonwealth government believes.
The government has responded to an independent review on how small businesses are affected by recent import regulations on illegally logged timber.
The report, carried out by KPMG, looked specifically at the Illegal Logging Prohibition Act and amendment regulations (commencing in November 2012 and November 2014, respectively), which apply to all businesses importing wood products ¬– including pulp, paper and furniture – where the value of the consignment exceeds $1000.
The regulations make it a criminal offence to import a product containing timber that has been illegally logged and also requires importers to carry out ‘due diligence’, ascertaining if they are dealing with illegally logged timber.
According to the report, 17,254 importers and 468 timber processors are affected by the regulations.
Of these businesses, close to 60% are small, with an annual turnover of $10m or less per year.
The review also found evidence the regulations are contributing to the reduction of the risk of illegal wood products entering Australia, even though importers are still bringing themselves up to compliance.
The report says illegal logging has significant social, environmental and economic costs both regionally and globally, estimating the global economic cost of illegal logging could be between US$30bn and US$100bn.
Australia’s share in the illicit timber trade is uncertain, the report says the problem is significant, with an estimated 9% of Australian imports coming from illegal sources, undercutting local market prices and disadvantaging Australian businesses.
Changes about “balance”
In a recent statement, federal Minister for Small Business and Assistant Treasurer, Kelly O’Dwyer said the review found there was an opportunity to change the existing regulation to strike a better balance between the risk of illegal timber entering the Australian market and the very real cost of compliance to small businesses which are doing the right thing.
“Any changes to illegal logging regulations will be about finding that balance and the government will continue to consult stakeholders on any proposed regulatory changes,” Minister O’Dwyer said.
In a statement dated February 25, Assistant Minister for Agriculture and Water Resources, Senator Anne Ruston said the review identified a range of actions likely to minimise the business cost of complying with Australia’s illegal logging regulation.
“The government remains completely committed to combating the illegal logging trade and in addition we are now minimising unreasonable and unnecessary costs on businesses,” Minister Ruston said.
“Illegal logging has significant global economic, environmental, and social impacts and undercuts the legal timber market here in Australia.”
There is an 18-month compliance period in effect, due to end in May 2016. During this time the government will not issue penalties for non-compliance outside of serious and deliberate breaches of the act.
“We know that it can take time for businesses to adjust to new regulatory arrangements, so we will extend the existing ‘soft-start’ compliance period while the changes are being progressed, so no penalties will apply for failing to meet the due diligence requirements,” Minister O’Dwyer said.
KPMG’s regulatory review, completed last year, but only recently released, carried five recommendations for the Australian Government to mitigate the financial burden of compliance on small importers.
The Government has agreed or agreed in principle with all five recommendations and it will communicate its final decisions on changes in a regulation impact statement sometime in the first half of 2016.
The report’s first recommendation calls for the Government to increase the individual consignment value threshold to $10,000 from the present $1000.
In its response, the Government recognises increasing the threshold would assist small businesses in addition to larger companies that import regulated products in small quantities.
The report also recommended the Government streamline due diligence requirements by establishing ‘deemed to comply’ arrangements whereby importers of timber products supplied by certified suppliers or have necessary documentation would not need to undertake unnecessary information gathering or risk assessment processes.
The Government has agreed with the report’s recommendation that it undertake voluntary on-site compliance assessments of businesses during the 18-month compliance period.
The report’s last two findings will also be taken on board by the government. They suggest that additional country-specific guidelines be fast-tracked and the government develops better guidance or training workshops.
Assistant Cabinet Secretary and Assistant Minister for Finance, Dr Peter Hendy MP said any proposed changes would be informed by further consultation and progressed with minimal impact on businesses.
“Just as KPMG spoke with businesses and individuals from across the industry in undertaking this review, the government will continue that conversation on any proposed regulatory changes,” Minister Hendy said.
The Government is to undertake a comprehensive review of illegal timber regulations late next year.
- Increase the individual consignment value threshold in the regulations to $10,000.
- Establish simplified ‘deemed to comply’ arrangements by regulation.
- Undertake voluntary compliance assessments that assess an individual business’s compliance with the regulations.
- Fast track the development of additional country specific guidelines.
- Fund the development of better and more targeted guidance or training workshops.
- Nearly 60% of businesses affected by the regulation are likely small businesses, and these are responsible for importing approximately 20% (by value) of regulated timber products.
- Preliminary evidence suggests the regulation may be helping reduce the risk of illegally imported logged products entering Australia, but compliance work is ongoing.
- It is likely that small Australian businesses contribute at least their share of illegally logged timber to the domestic market.
- The requirements likely cover all sources of illegal timber entering Australia, but they do not account for the capacity of individual businesses, particularly small ones, to absorb the cost of compliance.
- The regulation should be amended to address the issue of cost to small businesses of compliance, striking a better balance between the cost of compliance and the risk of illegal timber entering Australia.